A FLOOD of cheap labour coming from Europe's new states would push down wages in some of the most poorly paid parts of Wales, it was warned last night.

Campaigners - both those supportive of a free labour market in the expanded Europe and those opposed - said Welsh business were in a no-win situation. Either they took advantage of the possibility of cheaper labour or risked losing jobs abroad.

But Government and National Assembly ministers have dismissed warnings that Britain will witness mass migration following the European Union expansion in May unless limits or quotas are imposed.

The UK Government is expected to announce on Monday details of a work- permit scheme to stop "benefits shoppers" from cheating the system when the 15-state EU is joined by 10 Eastern and Central Bloc countries.

However, it is facing mounting pressure to put restrictions or quotas on migrant workers from joining countries, similar to those being proposed by every current EU member bar Ireland.

Llanelli-born Conservative leader Michael Howard, himself the son of a Romanian immigrant, warned yesterday that the expected restrictions did not go far enough.

Mr Howard used a speech in Burnley to savage the BNP party and praise the importance of immigration to Britain's wealth and culture, but warned of the risk posed by EU expansion.

He said, "Our industries and businesses depend upon skilled labour and expertise which can often be found abroad. But people want to know that immigration is controlled."

He added, "Almost every other country in the EU has, quite rightly, taken the precaution of putting in place transitional arrangements to deal with immigration from accession countries. It is still not too late for the British Government to put in place transitional arrangements as well."

Average wage levels in Eastern Europe are less than half the minimum wage in Britain, and Wales has already lost hundreds of manufacturing jobs to states like the Czech Republic.

Plaid Cymru's economics spokesman, Adam Price, said there was anecdotal evidence that recruitment agencies were already targeting countries like Poland and Lithuania to meet the skills shortages in sectors such as construction in South Wales.

He added, "When you have an internal market of huge wage differences, it does exert a downward pressure on wages.

"It is an economic fact, whether it's through jobs being exported to countries where wages are lower, or people from low-wage regions coming into another labour market."

However, the Carmarthen East and Dinefwr MP said the answer was not to impose restrictions which would "fuel the negative stereotype" but to raise the wealth of all member states in the EU.

Andrew Davies, the Assembly's Economic Development Minister, dismissed dire warnings from the Shadow Home Secretary David Davies that "many of the 75 million citizens will wish to come to Britain irrespective of benefits".

He said, "I can understand if people have concerns, but I think they are misplaced. I just don't expect people will be flooding into Britain from the Czech Republic or other countries, taking jobs and reducing wages."

The Government now faces a squeeze between critics from the left who warn any limits on the new EU states will create a "two-tier Europe", and critics on the right who suggest the current proposals are too soft.